Global Economics

Big Drop in European Steel Demand

Declining auto production and construction could lower European demand for steel by 15% this year, the industry's association says

Eurofer, the European confederation of iron and steel industries, said Thursday (5 January) it is bracing itself for a fall in demand for steel in the range of 15 percent for 2009.

"The EU steel market is severely impacted by the recession and will be facing an unprecedented downturn this year," said the confederation in a statement.

The drop in car production is the main factor in the reduced demand for steel the confederation said, but the downturn in the construction, steel tube and engineering sectors will also have significant negative impacts.

"Apparent consumption will drop by 29 percent year-on-year in the first quarter and by a further 23 percent in the second quarter," Eurofer said, with decline slowing somewhat in the second half of 2009 as the market corrects itself.

Bruno Bolfo, chairman and owner of Duferco, the world's biggest steel trading company told the Financial Times over the weekend that any steel company expecting an upturn in the sector in late-2009 was deluding itself.

"The official line from the big companies is that a mild recovery of sorts could start in the second half. Of course, they have to say this – but really there's not much hope. An upturn so soon is just not on the cards," he told the newspaper.

Mr Bolfo continued that any pick-up in global steel demand in 2010 would be "small stuff."

Eurofer also warned that pressure from steel imports would remain high "because of the much stronger sacrifice the domestic producers are making in order to enable the market to reach a new equilibrium."

The European steel industry is the largest in the world with a turnover of €160bn and direct employment of 430 thousand people producing over 200 million tons of steel a year, 15 percent of the global output.

Faced with the current crisis, large steelmakers across the globe such as world leader ArcelorMittal (MT) have announced job cuts and reduced hour working weeks to combat the fall in demand.

Despite the problems faced by the sector, the commission said on Thursday that it is considering starting anti-trust procedures against a number of unnamed steel companies on grounds they acted as a cartel.

The companies received notification from the commission last October and the commission is now considering their responses.

If found guilty, the companies could be fined up to 10 percent of their yearly turnover.

Across the Atlantic, US senators will Friday (6 February) resume the debate on the proposed $900bn stimulus plan whose Buy American article, excluding EU steel, appears to have been softened.